If there's one talking point Obama and Romeny can agree on, it's that innovation creates jobs. By one metric, the regional jobs report supports that seemingly no-duh assertion. The metro region that includes Silicon Valley led the country in job growth, posting a 3.8 percent increase compared to the same time last year. San Francisco followed close behind with the second-highest growth rate at 3.6 percent.

Unsurprisingly, tech jobs led the way. Facebook is hiring. Twitter is hiring. Google is hiring. Startups are hiring. Rents in San Francisco have soared as young tech workers compete for scarce real estate. Tech industry boom times create a weird parallel universe effect. Headlines about the nation's economic stagnation drone on, but in the Bay Area new restaurants selling $9 grilled cheese sandwiches and $10 cocktails seem to open daily.

But the other key measure of the region's economic well-being undermines the uncritical optimism politicians tend to lavish on tech. In Silicon Valley, this nation-leading hub of economic vitality and job creation, the unemployment rate in June was 8.8 percent, an increase of nearly half a percent from May, and well above the national average. To be sure, the current rate is a big improvement compared to June of last year, when 10.2 percent of the region's labor force was out of work. But shouldn't a place as exceptional as Silicon Valley be able to do better than that? Shouldn't such an engine of economic vitality stand out more in its prosperity compared to the rest of the United States?

In the definitive annual report on the state of Silicon Valley's economy, the Silicon Valley Index, researchers earlier this year found that jobs for highly educated workers abound. Average incomes are on the rise, fueled by hot competition for talent among mobile, internet, social media and cloud-computing companies. Yet the Index also found that median incomes have fallen, and more students are receiving free or reduced-price lunches — a standard measure of economic hardship. In other words, as some workers make notably more money, more workers are making less. Today, many of them are still not finding work at all. As I've written about before, tech's trickle-down effect looks weak on the local level. The industry creates jobs for some, but not for all.

Academics have nicknamed this phenomenon the "hollowing out" of the U.S. economy. Highly skilled, highly educated workers do increasingly well in an increasingly specialized economy driven by knowledge work. Their prosperity feeds demand for low-paying service work. But when tech companies grow, they no longer create the kind of medium-skilled, middle-class jobs they did in the past. Facebook doesn't need factory workers.

"You can have companies doing well and you can have all this startup activity, but it no longer means lots of jobs," said Russell Hancock, president of Joint Venture Silicon Valley, which publishes the Silicon Valley Index. "That's the reality, and it's going to be that way from here on out. You don't need all the people you used to need."

Hancock tells Wired he believes the hollowing out of Silicon Valley reflects not a temporary condition but a basic structural change. The shakeout has just started, he says, as newer tech companies seek to stay lean and nimble and old-school Valley companies try to look more like the new ones. Companies don't seek the talent that's closest to home — they seek the best people in the world, wherever they may live. We all need to view ourselves as startups in this new economy, which means a willingness to reinvent ourselves, Hancock says.

But as anyone in Silicon Valley knows, startups fail fast and often. It's the winners who make headlines. The losers simply fade into the dustbin of history.

"We used to have an economy that had absorption capacity. It could provide opportunities for the whole," Hancock says. "Now we have an economy that's brutal, an economy that only rewards people at the high end. The rest I don't know. I don't know what's going to happen."